Cathie Wood on Market 'Broadening Out,' Tesla, Retail Investors

Clearly, you are feeling a fresh round of pain right now. What is your strategy? What are you buying? What are you selling? Well, we keep our eye on the prize. We have a five-year time horizon and actually when, when we go through a a route like this, first of all, the rotation now is happening very quickly.

It started off slowly and is happening quickly uh. So i'm happy that the market is broadening out. This was this was the case in late 16 as well. Value took off and left growth behind, and whenever i see that happen i say: okay, this bull market has broadened out.

This is good news. What we do during these periods is concentrate our portfolios towards our highest conviction, names and so that's. What we're doing, we had uh extended the number of names in the portfolio from the low to mid 30s at the bottom of the corona virus.

And now we're at roughly 55 on for our flagship fund and we are starting to sell the more liquid names and buy some of the more pure play names. So the the more liquid names are either more mature, the facebooks, the apples and so forth, or uh and uh, or they are um participating in innovation, but they're, not pure plays so regeneron, novartis and so forth.

So more liquid. In order to have cash-like instruments to use at a time like now and move again concentrate towards our highest conviction names, so let's. Talk about tesla, then you said that uh you were only going to buy the dip.

Are you going to continue to buy the the tesla dip now that it's, dipping even lower? Yes, we can buy a stock up to 10 of our portfolios uh and that's. Certainly in the etfs we report our holdings at the end of every day uh, so anyone can see that and yes uh, we have been building whenever we can.

Now we built up to 10 last week, so uh the stock behaved in line with our portfolio. So uh again, we can't buy anymore here, uh if it were to deteriorate at a rate uh beyond that of our other portfolio, so drop below.

That 10 percent uh we would then have the latitude to to buy more. Of course, now you've said you're, going to put out a new tesla price target. The market is anxiously waiting for that. When are we going to see that? Can you give us an idea of what the target will be? Well, it's, going to be uh in i'm going to say a couple of weeks.

We're, getting compliance. Uh is helping us cross our t's, dot our eyes and do everything we should do before we uh before we send it out, but the two things that have happened to tesla since our last uh uh projections are one uh.

It has increased its market share uh when we put out our original um four thousand dollars. Uh uh price targets, the equivalent of eight hundred dollars now uh. We thought that uh that tesla's share, would drop from 17.

This is share of the electric vehicle market global electric vehicle market from 17, then to 11. Instead, its share increased, as others with wonderful brand names started, increasing the number of uh electric vehicles uh in in their companies, so that that was a big big wake up.

In the united states, i think uh tesla through the third quarter, at least uh was still 80 of all electric vehicles sold in the united states, so pretty stunning. The second thing that has happened is autonomous are the probability that tesla gets autonomous right.

We believe has increased from the 30 percent that we had in our base case uh in our last model uh. So what's interesting about autonomous? Is the margins in autonomous? The gross margins are in the 80 range.

The margins for electric vehicles alone, uh, are in the 25 to 30 range. This is a five-year projection, so the model changes completely if uh tesla gets autonomous right and we think it will okay. Now, as i said earlier, it look arc came back even stronger after the big pandemic shock, but we seem to be in a totally different environment right now.

Right now, this seems to be happening because of rising yields. How do you come back even stronger this time? Oh well, truth wins out uh. We know that uh, our focus on disruptive innovation, uh is going to be very productive.

We're. We're, focused on five platforms involving 14 technologies, all of which are moving into exponential growth, trajectories and beyond that many of these technologies are converging so autonomous taxi networks are comprised of three technologies or three platforms.

Robotics autonomous vehicles are robots, uh electric. They will be electric, it's, electric is going to be the cheapest uh way to go and uh artificial intelligence. They will be powered by artificial intelligence now uh.

Those are three s-curves coming together and we think they're, going to cause explosive and highly profitable growth uh, and i don't think most research departments are set up to uh focus on innovation.

This way they're. Very siloed specialized uh we're, focused on platforms. They're, focused on sectors um, and we're, focused on the 14 different technologies associated with those platforms. These s-curves are going to collide and create so much positive energy that we think analysts.

Traditional analysts especially are going to be uh gobsmacked, shall i say by how powerful they are going to be yeah. I'm curious kathy. What's? Your relationship with elon musk, how much contact do you have with him? What kind of conversations have you had any fun and crazy stories? No, we did our our podcast actually, the way we do.

Our research is uh uh. We will speak with ir. We don't want any special treatment, but we have a five-year time horizon, and so we're, really asking more technology questions than anything about the short term, so you can see from the podcast i think march of 19, as the Stock was cascading downward uh, we had a fa, fantastic tasha keaney and i had a fantastic uh podcast with elon and that that uh podcast is evergreen.

Because again, we're talking about long-term time horizon, so you'll, see how brilliant he is and how focused he is uh on on tesla, and we did talk uh about the crypto uh decision. The decision to shift some cash into crypto uh, certainly we were fully supportive of that uh.

Any company on the right side of change. Uh should should do uh diversify in that way. Okay, but should he keep diversifying or is one and a half billion enough for you um? You know i'll leave that to to their judgment.

We we of course - and i know they believe they should keep enough cash on their balance sheet - to support uh, uh, their operations and uh. I think, with the focus on their cash uh that that they are not going to do anything, wild and crazy.

Here you know kathy, you've been coming on this show for years, and in that time your popularity has exploded. You & # 39. Ve got your own line of arc merchandise. The media loves talking to you and talking about you, they've, called you, the anti-warren buffett.

How do you feel about not being just an investor but a celebrity investor? I i don't. Think of myself. That way, i think of myself. You know sitting down every day with our analysts and being really excited about the way the world's, going to work and really just wanting to share that with people uh.

You know from an educational point of view, just help people understand how radically the world's going to change and how it is so important to get on the right side of change, and i'm, not just talking about portfolios here.

I'm talking about you, know: parents and grandparents guiding their children and grandchildren to the right side of change. That's. How radically we think the world is going to transform. So when we go through a rotation in the market like this, you know, as i mentioned before, i think the bull market's, broadening out that's great, but be careful.

This rotation into value make sure you understand whether these companies are are primed to move into this new world or if they're going to be disrupted, and you know we do think energy and financial services, which are the two best performing groups this Year so i think it's 37 and uh 15, something like that.

We think they are going to be some of the most disrupted uh sectors, uh of all uh, given electric vehicles, autonomous electric vehicles and digital wallets. So i i work just really charged up saying: hey it's a beautiful day.

Let's. Let's. Share! Let's! Share the news. Let's! Share the good news. Now. Do you ever worry, the the rising retail interest in your funds could uh have negative consequences given how quickly and powerfully we've seen retail investors move the market in the last few weeks.

You know i on my i i did a youtube video. We're, starting to do them uh regularly, now that the markets are unsettled, and in the last one i i depicted the difference between institutional and retail uh investors.

Today, we we are much more um embraced by the retail investor. The retail investor has seen the future really before institutional investors, because post tech and telecom crash and post 0809 meltdown institutions have been forced to track their benchmarks more closely or they've chosen to.

We think that's longer term. A losing prop proposition it's very backward looking, so we have found some of our strongest holders to be retail investors because they really are keeping their eye on the price.

They know the world is changing. They're part of making the change so uh we haven't sure we are having redemptions uh, but uh. You know we are surprised at how low our redemptions have been. You know you haven't traditionally seen outflows like you've, seen over the last few days and weeks.

How loyal do you think your investors are? How sticky is your model? I think if they're paying attention to our research if they're reading it if they're listening, we're going to have a market update tomorrow.

We open that to everyone uh. If they ask us questions and understand the depth of our research and the depth of our conviction in our research, they learn that uh. You know they want to keep their eye on the prize as well.

So you know: what do you do during a period like this? Well, you buy low and maybe you take profit, sell high, you know but not sell out trade around positions and that's. What we're, seeing them do, and i think that's been healthy, but frankly, as you see as you will see in our holdings at the end of every day, in our trades we are averaging in we're Using this period to average into one of the most important uh or some of the most important companies uh of our lifetime, it is international women's day kathy, and i know your team is very diverse, including many women curious.

If you think that's, part of your secret, are you hiring and if you're hiring, who what are you looking for? Oh, i i do think. I think a diverse, diverse points of view i think, are critical and uh. Yes, so i think yes, that has helped us without a doubt and yes, we're, hiring uh.

We're. We're, looking for another asian innovation, analyst and uh, and perhaps another next generation internet analyst, so um. Yes, we're, we are hiring and we have to fill in uh as well uh management positions.

You know to get the operations to scale the way we would like them to scale. So absolutely we're. We're excited about the talent that is self-selecting. I've, been thrilled. I wish more women would self-select.

I have to tell you that that's, been. My big surprise is, in the early days uh women self-selected to into ark all the time, and now that we've hit our stride. I'm, seeing fewer women, so i'm going to put that call out there today and say we'd love to interview more women uh.

You know those who are interested in innovation and uh and really understand because they have domain expertise either from school or industry, really understand and are excited about the way the world's going to work now.

Uh. Given all of these, these new investors who are coming into the market companies like robin hood, making it easier than ever to trade with the increased retail attention, do you ever have any concern that there are all these sort of shiny new objects competing for retail attention That that could compete with arc.

And how long do you think this correction will last well, i think uh uh on the first topic, i don't. Think anyone's, doing the kind of research we are uh and that would that is what buttresses the the firm and the portfolios.

So i'm, not really worried. I'm. I'm glad that there are more uh there's more capital moving into innovation. It may not be as disciplined as ours is around wright's law and you know building models five six years worth of models here, but i do think allocating capital towards innovation is the right thing to do.

There is so much innovation taking place out there and to keep uh the us in particular, or the developed world uh competitive. We must invest in innovation and and and for another reason, how are we going to get out of the mess that the coronavirus crisis put us in many people would say tax tax cut spending.

Our point of view? Is we really with with the exponential growth opportunities ahead of us? We could grow out of a lot of our problems so, and i also think that our social media, social marketing and uh and some social distribution strategies are also giving us a competitive advantage.

Most of most of the marketing uh and media around our research, so so that, in terms of the market, how long will this correction uh evolve? Let's put it this way. We believe we're in a v-shape recovery.

We believe earnings growth is going to be pretty explosive here uh. We believe that value and growth will do very well. Of course, value uh has been more depressed. We understand that rotation, but we also know there are minefields out there in value.

So i think earnings are going to take out of this and and with each quarterly earnings report. Um we'll, have more reasons to buy this market.